Designer Brands Inc.

(unaudited)

1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS

Business Operations- Designer Brands Inc. is one of the world's largest designers, producers, and retailers of footwear and accessories. We operate inthree reportable segments: the U.S. Retail segment, the Canada Retail segment, and the Brand Portfolio segment. The U.S. Retail segment operates the DSW Designer Shoe Warehouse ("DSW") banner through its direct-to-consumer stores and e-commerce site in the United States ("U.S."). The Canada Retail segment operates The Shoe Co., DSW, and Rubino banners through its direct-to-consumer stores and e-commerce sites in Canada. The Brand Portfolio segment primarily earns revenue from the wholesale of our branded products to retailers and international distributors and the sale of our Vince Camuto, Keds, and Topo brands through direct-to-consumer e-commerce sites.

Basis of Presentation-The accompanying unaudited, condensed consolidated financial statements have been prepared by management in accordance with accounting principles generally accepted in the U.S. ("GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, we do not include all of the information and footnotes required by GAAP for complete financial statements. The accompanying financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. All such adjustments are of a normal, recurring nature. The condensed consolidated financial position, results of operations, and cash flows for these interim periods are not necessarily indicative of the results that may be expected in future periods. The balance sheet as of February 1, 2025 has been derived from the audited financial statements at that date. The financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the 2024 Form 10-K.

Fiscal Year-Our fiscal year ends on the Saturday nearest to January 31. References to a fiscal year (e.g., "2025") refer to the calendar year in which the fiscal year begins. This reporting schedule is followed by many national retail companies and typically results in a 52-week fiscal year (including 2025 and 2024), but occasionally will contain an additional week resulting in a 53-week fiscal year.

SIGNIFICANT ACCOUNTING POLICIES

Accounting Policies- The complete summary of significant accounting policies is included in the notes to the consolidated financial statements as presented in our 2024 Form 10-K.

Principles of Consolidation- The condensed consolidated financial statements include the accounts of Designer Brands Inc. and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. All amounts are in U.S. dollars.

Use of Estimates- The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and reported amounts of net sales and expenses during the repor ting periods. Certain estimates and assumptions use forecasted financial information based on information reasonably available to us. Significant estimates and assumptions are required as a part of accounting for customer returns and allowances, gift card breakage income, deferred revenue associated with reward programs, valuation of inventories, depreciation and amortization, impairments of long-lived assets, intangibles, goodwill and investments, lease accounting, redeemable noncontrolling interest, income taxes and valuation allowances on deferred tax assets, and self-insurance reserves. Although we believe that these estimates and assumptions are reasonable, they are based on management's knowledge of current events and actions we may undertake in the future. Changes in facts and circumstances may result in revised estimates and assumptions, and actual results could differ from these estimates.

Severance-During the three months ended November 1, 2025 and November 2, 2024, we incurred severance costs of $3.2 million and $1.2 million, respectively. During the nine months ended November 1, 2025 and November 2, 2024, we incurred severance costs of $7.3 million and $5.5 million, respectively. These costs are included in operating expenses on the condensed consolidated statements of operations and no amounts were material to any individual reportable segment. As of November 1, 2025, February 1, 2025 and November 2, 2024, we had $3.8 million, $1.3 million and $2.0 million, respectively, of severance liability included in accrued expenses on the condensed consolidated balance sheets.

Income Taxes- For the nine months ended November 1, 2025, we used the discrete effective tax method to calculate our interim income tax expense. The discrete method is used when the application of the estimated annual effective tax rate is impractical because it is not possible to reliably estimate the annual effective tax rate. The discrete method treats the year-to-date period as if it was the annual period and determines the income tax expense or benefit on that basis. We determined that using the discrete method is more appropriate at this time due to the high degree of uncertainty in estimating annual pretax earnings as we are unable to predict the severity of macroeconomic uncertainty, whether or when such circumstances may improve or worsen, or the full impact such circumstances could have on our business.

For the three months ended November 1, 2025 and November 2, 2024, our effective tax rate was positive 38.1% and negative 20.2%, respectively, and for the nine months ended November 1, 2025 and November 2, 2024, our effective tax rate was positive 50.0% and negative 7.9%, respectively. The positive effective tax rate for the nine months ended November 1, 2025 differed from the statutory rate primarily due to the impact of permanent non-deductible compensation. The negative effective tax rate for the nine months ended November 2, 2024 was due to discrete tax benefits recognized, primarily related to the release of tax reserves no longer deemed necessary and state tax planning initiatives, which partially offset the tax calculated on income before income taxes at statutory rates.

On July 4, 2025, new U.S. tax legislation H.R.1, referred to as the One Big Beautiful Bill ("OBBB"), was signed into law. OBBB contains several changes to corporate taxation including accelerated fixed asset depreciation, limitations on deductions of interest expense, and modifications to capitalization of research and development expenses. We have determined that the impact of OBBB on our estimated 2025 annual effective tax rate will not have a material impact on our financial statements.

Equity Investment in Pro-Keds JV- On July 28, 2025, we contributed cash of $1.9 million and the Pro-Keds tradename at a fair value of $2.7 million in exchange for a 45.0% interest in Pro-Keds International S.r.l. ("Pro-Keds JV"), which manages the Pro-Keds brand. We account for our investment in Pro-Keds JV, where we exercise significant influence but do not have control, using the equity method.

Fair Value- Fair value is defined as the price that would be received in the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities recorded at fair value are categorized using defined hierarchical levels related to the subjectivity associated with the inputs to fair value measurements as follows:

• Level 1 - Quoted prices in active markets for identical assets or liabilities

• Level 2 - Quoted prices for similar assets or liabilities in active markets or inputs that are observable

• Level 3 - Unobservable inputs in which little or no market activity exists

The carrying value of cash and cash equivalents, receivables, and accounts payable approximated their fair values due to their short-term nature. The carrying value of borrowings under our ABL Revolver and our Term Loan approximated fair value based on the terms and variable interest rates.

Impairments- During the nine months ended November 1, 2025, we recorded impairment charges to long-lived assets of $1.5 million due to an underperforming U.S. Retail segment store and $1.0 million due to underperforming Canada Retail segment stores, and to a cost-basis investment of $2.0 million due to an interest in an equity security without a readily determinable fair value held at cost, which resulted in no remaining value due to the lack of liquidity and the deterioration in the business prospects of the investee. During the three and nine months ended November 2, 2024, we recorded impairment charges to long-lived assets of $9.2 million due to a vacated leased corporate office, $1.0 million due to an underperforming Canada Retail segment store and $0.6 million due to an underperforming U.S. Retail segment store, and to our equity investment ownership interest in Le Tigre of $7.0 million, resulting in no remaining value, due to the inability of Le Tigre to generate earnings with expected future losses.

Recently Issued Accounting Pronouncements- In November 2024, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Income Statement Expense Disaggregation Disclosures, which requires disaggregated disclosures for specific cost and expense categories such as inventory purchases, employee compensation, depreciation, and amortization, as well as other disclosures. ASU 2024-03 is effective either on a retrospective basis to all prior periods presented or on a prospective basis beginning with our 2027 Annual Report on Form 10-K and subsequent interim periods. We are currently evaluating the impact of adopting ASU 2024-03 to the notes of the consolidated financial statements.

In September 2025, the FASB issued ASU 2025-06, Intangibles - Goodwill and Other - Internal Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, which eliminates accounting consideration of software project development stages and instead requires capitalization to begin when management authorizes and commits to funding the project and it is probable the software will be completed and used as intended. ASU 2025-06 is effective for us in the first quarter of 2028 and early adoption is permitted either on a retrospective, prospective, or modified prospective approach. We are currently evaluating the impact of ASU 2025-06 on the consolidated financial statements and related disclosures.

2. ACQUISITION

On April 8, 2024, we completed the acquisition of Rubino Shoes Inc. ("Rubino"), a retailer of branded footwear, handbags, and accessories that operates Rubino banner stores and an e-commerce site in Quebec, Canada. The acquisition of Rubino has allowed our Canada Retail segment to expand into the province of Quebec. The final purchase price and the allocation of the total consideration to the fair values of the assets and liabilities was finalized as of November 2, 2024, and consisted of the following:

The fair value of the intangible asset relates to an indefinite-lived tradename and was estimated using the relief from royalty method of the income approach. The fair value measurements are based on significant unobservable inputs, including discounted future cash flows and an assumed royalty rate. The fair value of the operating lease assets was determined based on the market valuation approach. The goodwill, included within the Canada Retail segment, represents the excess of the purchase price over the fair value of the net assets acquired and was primarily attributable to acquiring an established retail banner in a province in Canada we did not previously have a presence in. Goodwill is not deductible for income tax purposes.

3. REVENUE

DISAGGREGATION OF NET SALES

Beginning with the 2024 Form 10-K, we changed the presentation of disaggregation of net sales for all periods presented to include net sales by product and service categories with an athletic footwear category and excluded the previously presented disaggregation of net sales by brand categories. This change aligns with how management evaluates the net sales performance of our segments.

The following table presents net sales disaggregated by product and service categories for each segment:

DEFERRED REVENUE LIABILITIES

We record deferred revenue liabilities, included in accrued expenses on the condensed consolidated balance sheets, for remaining obligations we have to our customers. The following table presents the changes and total balances for gift cards and reward programs:

4. RELATED PARTY TRANSACTIONS

SCHOTTENSTEIN AFFILIATES

We have transactions with entities owned or controlled by Jay L. Schottenstein, the executive chairman of our Board of Directors (the "Board"), and members of his family (the "Schottenstein Affiliates"). As of November 1, 2025, the Schottenstein Affiliates beneficially owned approximately 30% of the Company's outstanding common shares, representing approximately 66% of the combined voting power, consisting of, in the aggregate,7.1 million Class A common shares and 7.7 million Class B common shares.

The following summarizes the related party transactions with the Schottenstein Affiliates for the relevant periods:

Leases- We lease certain store and office locations that are owned by the Schottenstein Affiliates. For thethree months ended November 1, 2025 and November 2, 2024, we recorded rent expense from the leases with Schottenstein Affiliates of $1.7 million and $1.8 million, respectively. For the nine months ended November 1, 2025 and November 2, 2024, we recorded rent expense from the leases with Schottenstein Affiliates of $5.2 million and $5.4 million, respectively. As of November 1, 2025, February 1, 2025 and November 2, 2024, we had related party current operating lease liabilities of $4.7 million, $4.5 million and $4.0 million, respectively, and non-current operating lease liabilities of $14.2 million, $13.4 million and $17.7 million, respectively.

Other Purchases and Services and Due to Related Parties- Amounts for other purchases and services we incurred from the Schottenstein Affiliates and the amounts due to the Schottenstein Affiliates, other than operating lease liabilities, were immaterial for all periods presented.

ABG-CAMUTO

We have a 40.0% ownership interest in ABG-Camuto, LLC ("ABG-Camuto"). We have a licensing agreement with ABG-Camuto, pursuant to which we pay royalties on the net sales of the brands owned by ABG-Camuto, subject to guaranteed minimums. For both the three months ended November 1, 2025 and November 2, 2024, we recorded royalty expense for amounts paid to ABG-Camuto of $4.8 million. For both the nine months ended November 1, 2025 and November 2, 2024, we recorded royalty expense for amounts paid to ABG-Camuto of $14.4 million.

5. EARNINGS PER SHARE

Basic earnings per share is based on net income attributable to Designer Brands Inc. and the weighted average of Class A and Class B common shares outstanding. Diluted earnings per share reflects the potential dilution of common shares adjusted for outstanding stock-based compensation awards calculated using the treasury stock method. The dilutive effect of outstanding stock-based compensation awards is applicable only in periods when we have net income attributable to Designer Brands Inc.

The following is a reconciliation between basic and diluted weighted average shares outstanding, as used in the calculation of earnings per share attributable to Designer Brands Inc.:

For the three months ended November 1, 2025 and November 2, 2024, the number of shares relating to potentially dilutive stock-based compensation awards that were excluded from the computation of diluted earnings per share due to their anti-dilutive effect was 2.7 million and 4.0 million, respectively. For the nine months ended November 1, 2025 and November 2, 2024, the number of shares relating to potentially dilutive stock-based compensation awards that were excluded from the computation of diluted earnings per share due to their anti-dilutive effect was 3.2 million and 3.6 million, respectively.

6. STOCK-BASED COMPENSATION

For the three months ended November 1, 2025 and November 2, 2024, we recorded stock-based compensation expense of $3.4 million and $3.6 million, respectively. For the nine months ended November 1, 2025 and November 2, 2024, we recorded stock-based compensation expense of $15.4 million and $15.0 million, respectively. These costs are included in operating expenses on the condensed consolidated statements of operations.

The following table summarizes the restricted stock units ("RSU") activity for the nine months ended November 1, 2025:

7. SHAREHOLDERS' EQUITY

SHARES

Our Class A common shares are listed for trading under the ticker symbol "DBI" on the New York Stock Exchange. There is currently no public market for the Company's Class B common shares, but the Class B common shares can be converted into the Company's Class A common shares at the election of the holder on a share-for-share basis. Holders of Class A common shares are entitled toone vote per share and holders of Class B common shares are entitled toeight votes per share on matters submitted to shareholders for approval.

The following table provides additional information for our common shares:

We have authorized 100 million shares ofno par value preferred shares, withno shares issued for any of the periods presented.

DIVIDENDS

On November 20, 2025, the Board declared a quarterly cash dividend payment of $0.05 per share for both Class A and Class B common shares. The dividend will be paid on December 19, 2025 to shareholders of record at the close of business on December 5, 2025.

8. RECEIVABLES

Receivables, net, consisted of the following:

9. PROPERTY AND LEASES

During the nine months ended November 1, 2025, we commenced operations of a new distribution center, which resulted in an additional operating lease of $22.4 million and additional finance leases for equipment of $32.8 million.

PROPERTY AND EQUIPMENT

Property and equipment, net, consisted of the following:

LEASES

The following table presents the classification and amounts for operating and finance leases on the condensed consolidated balance sheets:

The following table presents supplemental cash flow information related to leases:

10. ACCRUED EXPENSES

Accrued expenses consisted of the following:

11. DEBT

Debt consisted of the following:

ABL REVOLVER

On March 30, 2022, we replaced our previous senior secured asset-based revolving credit facility with our current ABL Revolver, which was subsequently amended on February 28, 2023 and June 23, 2023. The ABL Revolver provides a revolving line of credit of up to $600.0 million, including a Canadian sub-limit of up to $60.0 million, a $75.0 million sub-limit for the issuance of letters of credit, a $60.0 million sub-limit for swing-loan advances for U.S. borrowings, and a $6.0 million sub-limit for swing-loan advances for Canadian borrowings. In addition, the ABL Revolver includes borrowings of $30.0 million under a first-in last-out term loan ("FILO Term Loan"), which may be repaid in full, but not in part, so long as certain payment conditions are satisfied. Once repaid, no portion of the FILO Term Loan may be reborrowed. Our ABL Revolver matures in March 2027 and is secured by a first-priority lien on substantially all of our personal property assets, including credit card receivables and inventory. The ABL Revolver may be used to provide funds for working capital, capital expenditures, share repurchases, other expenditures, and permitted acquisitions as defined by the credit facility agreement. The amount of credit available is limited to a borrowing base formulated on, among other things, a percentage of the book value of eligible inventory and credit card receivables, as reduced by certain reserves. As of November 1, 2025, the revolving line of credit (excluding the FILO Term Loan) had a borrowing base of $493.6 million, with $322.7 million in outstanding borrowings and $4.0 million in letters of credit issued, resulting in $166.9 million available for borrowings.

Borrowings under the revolving line of credit and letters of credit issued under the ABL Revolver accrue interest, at our option, at a rate equal to: (A) a base rate per annum equal to the greatest of (i) the prime rate, (ii) the Fed Funds Rate (as defined in the credit facility agreement and subject to a floor of 0%) plus 0.5%, and (iii) Adjusted Term SOFR (as defined in the credit facility agreement) plus 1.0%; or (B) a one-month, three-month, or six-month Adjusted Term SOFR per annum (subject to a floor of 0%), plus, in each instance, an applicable rate to be determined based on average availability. The FILO Term Loan accrues interest, at our option, at a rate equal to: (A) a fluctuating interest rate per annum equal to the greatest of (i) the prime rate, (ii) the Fed Funds Rate plus 0.5%, or (iii) Adjusted Term SOFR plus 1.0%, plus 2.5%; or (B) Adjusted Term SOFR for the interest period in effect for such borrowing plus 3.5%. Commitment fees are based on the unused portion of the ABL Revolver available for borrowings. Interest expense related to the ABL Revolver includes interest on borrowings and letters of credit, with an interest rate of 6.3% as of November 1, 2025, commitment fees, and the amortization of debt issuance costs.

TERM LOAN

On June 23, 2023, we entered into the Term Loan, which matures at the earliest of the date the ABL Revolver matures (currently March 2027) orfive years from closing of the Term Loan (June 2028). The Term Loan is collateralized by a first priority lien on substantially all of our personal, real, and intellectual property and by a second priority lien on the assets used as collateral for the ABL revolver, primarily credit card receivables, accounts receivables, and inventory.

Borrowings under the Term Loan bear interest at a per annum rate equal to: (A) an adjusted three-month SOFR per annum (subject to a floor of 2.0%), plus 7.0%; or if (A) is not available, then (B) a base rate per annum equal to the greater of (i)2.0%, (ii) the prime rate, (iii) the Fed Funds Rate plus 0.5%, and (iv) the Adjusted Term SOFR plus 1.0%; plus, in each instance,6.0%, with an interest rate of 11.1% (effective interest rate of 12.5% when including the amortization of debt issuance costs) as of November 1, 2025.

DEBT COVENANTS

The ABL Revolver requires us to maintain a fixed charge coverage ratio covenant of not less than 1:1 when availability is less than the greater of $47.3 million or 10.0% of the maximum borrowing amount. At any time that liquidity is less than $100.0 million, the Term Loan requires a maximum consolidated net leverage ratio as of the last day of each fiscal month of 2.50 to 1.00, calculated on a trailing twelve-month basis. Testing of the consolidated net leverage ratio ends after liquidity has been greater than or equal to $100.0 million for a period of 45 consecutive days. The ABL Revolver and the Term Loan also contain customary covenants restricting certain activities, including limitations on our ability to sell assets, engage in acquisitions, enter into transactions involving related parties, incur additional debt, grant liens on assets, pay dividends or repurchase stock, and make certain other changes. There are specific exceptions to these covenants including, in some cases, upon satisfying specified payment conditions based on availability. The ABL Revolver and the Term Loan contain customary events of default, including failure to comply with certain financial and other covenants. Upon an event of default that is not cured or waived within the cure periods, in addition to other remedies that may be available to the lenders, our obligations may be accelerated, outstanding letters of credit may be required to be cash collateralized, and remedies may be exercised against the collateral. As of November 1, 2025, we were in compliance with all financial covenants contained in the ABL Revolver and the Term Loan.

12. COMMITMENTS AND CONTINGENCIES

We are involved in various legal proceedings that are incidental to the conduct of our business. Although it is not possible to predict with certainty the eventual outcome of any litigation, we believe the amount of any potential liability with respect to current legal proceedings will not be material to our results of operations or financial condition. However, legal proceedings are inherently uncertain. As a result, the outcome of a particular matter or a combination of matters may be material to our results of operations for a particular period. We are also involved in certain legal matters in which we have agreed to settlement terms with the plaintiffs, and such matters are fully covered under our insurance policies and accordingly all associated legal fees and settlement costs will be paid by the insurer. As a result, we have recorded accrued expenses for the estimated settlement obligations with corresponding receivables on the condensed consolidated balance sheets. As additional information becomes available, we will assess any potential liabilities related to pending litigation and revise the estimates as needed.

13. SEGMENT REPORTING

Ourthree reportable segments, which are also operating segments, are the U.S. Retail segment, the Canada Retail segment, and the Brand Portfolio segment. We have determined that the Chief Operating Decision Maker ("CODM") is our Chief Executive Officer.

The following tables provide certain financial data by segment reconciled to the condensed consolidated financial statements (total assets by segment are not presented in the table below as the CODM does not evaluate, manage, or measure segment performance using total assets):

(1) Other expense items include professional services fees, payment service fees, supplies, travel, and other administrative segment expenses.

(2) Corporate shared services costs and impairment charges are not attributed to any of our segments. Corporate shared services costs primarily relate to corporate administration, IT, finance, human resources, legal, real estate, and other shared services performing corporate-level activities. We also do not allocate amounts related to restructuring and integration charges (including severance) and acquisition-related costs.